Forrester: Economic Slowdown Should Not Hurt IT Jobs, Salaries

The research firm expects the economy to weaken, but not slide into a recession.

Given the darkening U.S. economic outlook, Forrester Research is updating its IT spending outlook for 2008.
However, as long as the U.S. economy has only two to three quarters of very weak real GDP (gross domestic product) growth—1 to 2 percent—but no recession in 2008, analysts don't feel that the slowdown will have any negative impacts on IT hiring or salaries.

"If we are correct in our forecast, we will end up with a slightly slowing down economic growth, near a recession level but not actually a recession. IT spending will slow, but not go into the negative," Forrester analyst Andrew Bartels told eWEEK.

The Forrester analysts lowered their projections for IT hardware and software growth from the 8 percent it pronounced in October to 5 percent the week of Dec. 10, but feel that this is just a dampening, not derailment, of U.S. and global IT purchasing. Analysts said U.S. IT purchasing growth will only slow slightly from 2007 to 2008, from 5.4 percent to 4.6 percent.
They expect that the slowdown in tech purchases will be concentrated in the first three quarters of 2008, with computer and communications equipment suffering the most.
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"Our conclusion is that there wouldn't be a damaging impact on IT jobs," said Bartels, adding that the slowdown will be closer to that of late 2006—brief, with a quick pickup afterward.
Part of the reason that IT professionals are likely to be immune from the effects of a slowdown in IT spending is that, if short-lived, it will be too brief to actually take IT hiring off course.
"It was too short and too shallow for CIOs to decide to make changes in head counts. If we see that again, something that is just a fraction of a percentage lower than the year before, it shouldn't be enough to affect IT jobs," Bartels said.
IT salaries should be largely safe as well, as they were mostly determined earlier in the fall, when the economy looked more stable. However, those IT pros who receive a large part of their income through bonuses will likely feel their pocketbooks lighten.
"It has been a practice that more and more compensation is in bonuses, not salary, so if there is a slowdown and profits get squeezed, bonuses just don't get paid. Bonuses are a very big part of compensation, but I don't see salary growth being affected. At this point, I don't see anything other than a soft freeze," he said.
A soft freeze in hiring—one in which CIOs would hire only if they absolutely had to have someone to avoid having to cut these same positions later in the year—is likely, according to Forrester, but they'll only be hitting the brakes if the slowdown runs beyond a few quarters.
"If a full recession actually happens, implications for tech jobs could be bad—freezes and cutbacks," Bartels said.
Still, even if a full recession comes to pass in 2008, the impact to IT pros won't reach the level of the 2001-2003 slowdown.
"What happened in 2001 to 2003 was almost unprecedented. In 60 years beforehand, we had never seen that level of decline in IT investment," Bartels said. "What we are seeing now is more typical—investment going flat and hiring perhaps slowing down but not declining. 2000 was the last year of the tech boom, and IT investment had been growing at twice the rate of the economy. There were a bunch of factors that pushed IT investment into a higher level than it had ever been."
However, he said that IT departments didn't necessarily get smaller—they just didn't get bigger.
"Unless it's a really bad recession, more than a couple quarters of slow growth, it wouldn't be significant enough to cause a downturn in IT hiring," he said.
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